KLY Kalytera Therapeutics Inc

Claritas Pharmaceuticals, Inc. (TSX VENTURE: CLAS and OTC: KALTD) (the "Company" or "Claritas") is pleased to announce that, subject to TSXV approval, it will close the first tranche of a brokered private placement offering (the “Offering”) of convertible debentures with Obsidian Global Partners, LLC (“Obsidian”) for net proceeds of USD $930,000. The Company is also pleased to announce the receipt of a cash rebate of R&D expenses from the Australian Tax Office in the amount of AUD $880,000, and the initiation of the Phase 1 clinical study of R-107 with CMAX in Adelaide, Australia. CMAX is one of Australia’s largest and most experienced clinical trial centers.

Highlights

• Claritas will receive aggregate proceeds of approximately CAD $1,980,000 (the “Aggregate Proceeds”) from the closing of the first tranche of the Offering and the receipt of a cash rebate of R&D expenses from the Australian Tax Office.
• Subject to the satisfaction of certain equity conditions, a second tranche of the Offering will close in 90 days and will provide additional proceeds of USD $750,000 and a third tranche will close 120 days following the closing of Tranche 2 and will provide additional proceeds of approximately USD $1,250,000.
• The Aggregate Proceeds will be allocated primarily to the cost of the Phase 1 clinical study of R-107, as well as for general corporate purposes.

Terms of the OfferingOn closing of the first tranche of the Offering, the Company will receive gross proceeds of USD $1,000,000 (the “Loan Amount”) and issue to Obsidian a zero-interest, unsecured convertible debenture (the “First Tranche Debenture”) with a face value of USD $1,175,000 (the “Principal Amount”). From the Loan Amount, the broker, B. Riley Financial, Inc., will be paid a 7% cash commission in the amount of USD $70,000. The First Tranche Debenture is convertible at the option of Obsidian into common shares of the Company (the “Common Shares”) at any time prior to the close of business on the date which is 12-months from the date on which the Loan Amount is funded (the “First Tranche Maturity Date”) at a conversion price that will be equal to 130% of the 5-day volume weighted closing price (“VWAP”) of the Company’s Common Shares on the TSXV during the five trading days prior to the date on which the Loan Amount is funded (the “First Tranche Conversion Price”). Any Common Shares issuable upon conversion of the First Tranche Debenture will be subject to a statutory hold period of four months commencing from the date of issuance of the debenture. Beginning on January 1, 2022, the Company is obligated to begin making monthly amortization payments to Obsidian in an amount equal to one-seventh of the outstanding Principal Amount (the “First Tranche Amortization Payments”). At the option of the Company, the First Tranche Amortization Payments may be paid in cash or may be paid in Common Shares if certain equity conditions are met, including minimum daily trading volume of CAD $50,000 and a market capitalization of at least CAD $15,000,000 (the “Equity Conditions”). If the Company elects to pay any First Tranche Amortization payments in Common Shares, such Common Shares will be issued at a price equal to a 5% discount from the lowest daily VWAP during the 10-days prior to the date on which such issuance shall occur. As a condition of the Offering, Robert Farrell, the Company’s President and CEO, and Dr. Andrew Salzman, the Company’s largest shareholder, will pledge Common Shares owned by them as collateral to secure 50% of the value of the Principal Amount of the First Tranche Debenture. The Company will enter into indemnification agreements with Mr. Farrell and Dr. Salzman under which the Company will be obligated to issue new Common Shares to each of them to replace any of their personal Common Shares that are transferred to Obsidian as a result of any default by the Company under the terms of the First Tranche Debenture.

The securities offered in the Offering have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or any U.S. state securities laws, and were not offered or sold in the United States or to, or for the account or benefit of, United States persons absent registration or any applicable exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.“We are delighted to announce this transaction with Obsidian, which has enabled the Company to initiate the Phase 1 clinical study of R-107 with CMAX in Adelaide, Australia,” said Robert Farrell, Claritas’ President and CEO. “We expect to complete the Phase 1 clinical study by Q1 next year, and to complete a pilot Phase 2a clinical study of R-107 in hospitalized patients with COVID-19 related PAH by Q3 next year.”

The Australian R&D Expense Rebate

The Australian Taxation Office (the “ATO”) provides a rebate to Australian companies of 43.5% of qualifying R&D expenditures. The Company’s Australian subsidiary, Claritas Australia Pty. Ltd., applied for rebates for R&D expenses incurred in 2018 and 2019. In July and September 2020, Claritas Australia Pty. Ltd received R&D rebates of AUD $1,376,000 and AUD $1,817,000, respectively. The Company has now received a third rebate of approximately AUD $880,000. The availability of such R&D rebates was a factor in the Company’s decision to conduct much of its research activities in Australia, including the Phase 1 clinical study R-107 that the Company has initiated with CMAX in Adelaide, Australia. Early next year, the Company will also initiate its planned Phase 2a study of R-107 in treatment of in patients with COVID-19 related PAH at CMAX. About Claritas PharmaceuticalsClaritas Pharmaceuticals, Inc. is a clinical stage biopharmaceutical company focused on developing and commercializing therapies for patients with significant unmet medical needs. Claritas leverages its expertise to find solutions that will improve health outcomes and dramatically improve people's lives.

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Cautionary StatementsNeither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This press release may contain certain forward-looking information and statements ("forward-looking information") within the meaning of applicable Canadian securities legislation, that are not based on historical fact, including without limitation in respect of its product candidate pipeline, planned clinical trials, regulatory approval prospects, intellectual property objectives, and other statements containing the words "believes", "anticipates", "plans", "intends", "will", "should", "expects", "continue", "estimate", "forecasts" and other similar expressions. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risk that future clinical studies may not proceed as expected or may produce unfavorable results. Claritas undertakes no obligation to comment on analyses, expectations or statements made by third parties, its securities, or financial or operating results (as applicable). Although Claritas believes that the expectations reflected in forward-looking information in this press release are reasonable, such forward-looking information has been based on expectations, factors and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond Claritas’ control. The forward-looking information contained in this press release is expressly qualified by this cautionary statement and is made as of the date hereof. Claritas disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. 

Contact InformationRobert FarrellPresident, CEO(888) 861-2008info@claritaspharma.com